What is Contract Drafting
Contract drafting is one of the most recognized and useful processes in the law. Parties need contracts to ensure that their business processes go according to plan. Some of the standard but most useful contracts are nondisclosure agreements, contractor agreements, and employee agreements. A nondisclosure agreement is typically used when a party shares confidential information with someone else. A contractor agreement applies when a company brings on a contractor for a specific term or task. An employee agreement is similar, though potentially with a much longer term. Each of these contracts require specific components. Drafting any contract requires a good understanding of what is going into the contract. The drafter must know what is expected to be included and how to document those expectations. Let’s dive deeper into these three contracts and the components that are standard in a good contract.
Nondisclosure Agreements (NDA) An NDA is a type of contract commonly utilized in business relationships. When a party hires a contractor, the contractor may have access to sensitive information. For instance, a technology company bringing a corporate contractor on board may give the contractor access to source code. Similarly, a financial service company may share account information with an accountant. Both of these may be examples of sensitive information worth an NDA. An NDA essentially provides that the party receiving the confidential information cannot share that information without permission . So, if a technology company, for example, shares source code with a developer, that developer cannot publish the source code to a public forum. NDAs are particularly useful for protecting intellectual property. That being the case, many NDAs go a step further by specifying remedies for any breach of the NDA. For example, an employer may discover that an employee unknowingly breached his employment contract via conversations and by sharing contacts with a third-party company. To protect confidential information, the employee may even be required to abide by a one-year non-compete clause.
Contractor Agreements Contractor agreements are essential for all businesses. They help make clear when a contractor has to start and end work. In many industries, the duration of work may be specified simply as "at need" or "on demand." A contractor agreement could also be used when a person would like to hire a contractor for a specific project. Even when a project may be all-consuming, it is good practice to have a timeline.
Employee Agreements Similarly to a contractor agreement, an employee agreement is a document that makes clear what is required of an employee. Every company that hires a new employee should have an employment contract. Much like an "at need" contractor agreement described in the previous section, a contractor may be hired to work "at will." This means that while the employee is not terminated for cause, the employee may be terminated at any time.
Advantages of Hiring a Contract Drafting Lawyer
The unique terminology and "header" language that goes into an attorney drafted contract or agreement is meant to protect all parties and keep things fair when the contract is enforced. Some of those terms include: Our contract drafting attorneys know when it’s best to use boiler plate language rather than very specific language. Sometimes, it makes sense to let parties somewhat define their own obligations in their own words. For example, when setting forth express warranties, it’s much more important to get all the bases of those warranties covered, as opposed to having a "word-count" limitation on how they’re described within the contract. An attorney will be able to anticipate issues and even say "this sort of warranty wouldn’t be enforceable," thus dissuading a client from bargaining something into a contract that will inevitably hurt them. A contract drafting attorney should always be ready and willing to walk a client through the contract step-by-step, and collaborate with them to make sure every important aspect of the agreement is covered. An experienced attorney knows that contracts often need updating. Outside of normal course business operations, contracts should be reviewed on a regular basis to make sure they still reflect what party’s obligations are and to ensure they’ve not become outdated. The majority of contract disputes are disagreements about who is responsible for what. We will work with you to make everything clear when defining the specific terms and obligations of each party. A good contract can prevent future litigation by setting forth clearly what party is responsible for routine and unforeseen events.
Pitfalls of Writing Your Own Contracts
Elements of a contract rarely have words associated with them that are terms of art. A contract needs to be a treasure trove of detail, or what I like to call Trade Secrets. It hurts my heart when I read a contract, and you can tell it wasn’t written by a professional; the two key motivations for all are time and cost. Yet, a poor contract has significant weaknesses and defects inherent to it. Over time, those defects will be found. It doesn’t matter if the contract is tied to a seven-figure construction project, or the purchase of office supplies — every contract needs to be "on point" from the beginning. It is insufficient to think that a contract drawn by a realtor or old college buddy lawyer who did your uncle’s will, will be up to snuff. Even more doomsday the majority of contracts that are created today are on a template from someone online. It frustrates me to see professionals occasionally push out the same form contracts and fail to keep abreast of changes in the law that affect their trade. Sure, I understand how it can save time and money, but this is no different than having a college freshman take care of his or her own physical health needs. It’s a false economy to assign responsibility for a contract to a simple secretary or "person in the mailroom" and then routinely review it once a year for "spelling, grammar and such." You only get one chance to fix your clients problems. I have met young business people who are contemplating creating their own contracts attempting to utilize products offered by online companies. But there still are gaps in their understanding and needs. Sure, many people will say, "Well, I never have problems with my contracts that I draft myself." That’s good, but I can tell you that the vast majority of contracts in dispute today are ones that were drafted by the parties themselves.
How to Select the Right Contract Drafting Lawyer
If you’ve decided to hire an attorney to help you prepare a contract, here’s what to look out for. The right contract drafting attorney should spend time with you to explain the important terms of the contract and answer any questions that you may have. They should be prepared to assist you in modifying even the smallest details of the agreement. The right attorney will want to make sure that the contract clearly reflects your intent and is drafted in a way to minimize the possibility of disputes. The right attorney will only recommend adding terms to the contract that are in your best interest.
This is especially true if you are hiring an attorney to draft a custom contract for your business. Custom contracts require attorneys who are skilled in modifying terms to suit your business concerns without exposing you to unnecessary risks. A good attorney will only recommend add-ons and changes where the substantive gain or security offsets the additional cost.
Some attorneys may have an industry background that makes them better able to draft a contract to address the specifics relating to that industry. It may be easier to find an attorney who is experienced in the particular industry in which you operate when drafting contracts related to that industry. For example , the real estate industry has multiple unique contract types that are specific to that industry. If you do most of your contracting within that industry, look for a real estate attorney that has experience drafting contracts for it.
Another consideration is that certain attorney-client relationships will work better when the contract to be drawn up is related to the business that the particular attorney normally handles.
Finally, cost of services is often a factor as well. Each attorney has his or her own billing policies and rates. If you have a limited budget for legal services, you should make contact with your attorney of choice and discuss the likelihood that he or she can work with you within your budget. Depending on the particulars of the contract, negotiations can sometimes go back and forth for days or months. If the work required to properly draft the contract exceeds your budget, the right attorney will be able to explain how to manage the process while remaining within your budget.
The Contract Drafting Process
The contract drafting process typically begins by scheduling an initial consultation. This meeting with your contract drafting attorney serves two purposes: to discuss your needs and goals, and to determine whether they have the requisite expertise to successfully draft the contract. If both parties feel comfortable, the process begins.
At this point, your attorney should begin to negotiate the terms you discussed in the initial consultation. This may involve multiple rounds of negotiation, during which your attorney will work to come to an agreement with the other party on the various conditions of the contract. Depending on your particular situation, your attorney may be able to handle all of the negotiations with the other party on your behalf, or they may advise you to attend one or more meetings so that you are involved in the process.
Once the various terms have been agreed upon, it’s time for the contract drafting process to begin. Through your discussions and negotiations, your attorney has likely developed an understanding of your proposed deal that will help them in creating the contract. During this time, your attorney may also research any issues that may arise with regard to the contract. This is an important step: contracting law is not universal, and different states or jurisdictions may have regulations that will affect your contract.
Depending on the complexity of your agreement, the attorney may provide you with an initial contract draft within a few days to a couple weeks of beginning the process. Once you receive the draft, you should carefully read through it and mark up any parts that you disagree with, as well as adding any initial questions or comments. In a simple contract, this process may only take one or two passes – however, in a more complicated agreement, you may need several back-and-forths with your attorney.
Once you and your attorney have reached a mutually agreeable draft after several revisions, the contract becomes final and can be signed by both parties. If your contract will be submitted to a court or monitoring agency for approval, your attorney at this time will file the necessary documents on your behalf.
Examples of Successful Contract Drafting
When it comes to contract drafting, real-life examples speak louder than words. For instance, consider the case of a digital marketing agency that had been working with the same client for years. They snatched the client from across the street and soon became their sole provider for digital marketing services. The owner engaged an employment attorney to draft all new employment contracts for the marketing firm and its employees. The agreement required two weeks advance notice for both sides to cancel services and terminate the agreement. After a couple of years of hard work, the two-week timeframe drifted from the owner’s memory and an employee offered services to previously approved clients instead of directing them back to the agency. The client was not happy. But the contract protected the agency from a major conflict.
If the agreement had not been created by an employment attorney, the owner may have maintained his exclusive client for many years to come. Or the agency could have lost the client without any way to mitigate damages.
Another example is a global manufacturer that had Japanese ownership. They engaged an attorney to negotiate a management agreement with a foreign entity. The agreement was structured so the company could provide funds to start up their own company after ten years. The owner wanted to save money by hiring an employee without secure immigration status. There was a two-week delay in getting the person on the plane due to delays in getting work permits , authorizations, and visas through the complex web of requirements in Japanese Government. However, the employment attorney had the foresight to draft the agreement for a longer period. Because of the delays in work permits, the company matured and could afford to pay its founder a higher salary. In the end, the owner was very happy he had paid the extra money for someone who understood the risks and benefits of a contract.
In a third scenario, a high-tech publishing company had created a website to help authors. A well-known publishing house reached out to negotiate an agreement to list their books on the company site and offer incentives. No one bothered to sign the agreement. A couple of months later, the major publisher listed the books for sale at 20 percent below the company’s contracted price. The good news is, the publishing house received a lot of publicity. The bad news was that its core clients learned they had gotten their prices wrong. The contract would have protected the company if it had been executed.
Hiring a contract drafting attorney can make the difference between resolving a conflict or being forced to pursue litigation to bankruptcy court. It’s a lot less expensive to hire an employment lawyer now than it is to pay legal fees later to try and resolve a problem that never should have happened in the first place.